“pigs get fat, hogs go to slaughter”
I am sure you are wondering what pigs have to do with small business taxation, why I would actually recommend you “be a pig”, and why I have a innocent looking pig in a crosshair. Well, the answer is threefold:
1) When meeting with new small business clients, the first questions usually revolve around what they can deduct and how they can maximize these deductions. My philosophy has always been to educate them on the tax deduction essentials, and to assist them in arranging their affairs so that they maximize their deductions. However, there is a delicate balance between claiming everything you are entitled to and aggressive tax positions that will put you in the crosshairs of the IRS. This is where the above pig and hog quote comes in to play, as it is okay to be a pig and get serious about maximizing your tax deductions, just don’t be a hog and get too aggressive with your deductions. Most of the deductions I have seen the IRS disallow in audit have been expenses that the client went a little too far with. Had they just taken a more reasonable approach and paid a little more in tax, they might have avoided the attention of the IRS altogether.
2) Pigs are not afraid to get dirty, and as a small business owner, you need to dig in and learn the tax and accounting essentials. I understand that for most small business owners, the very thought of taxes and accounting is just about as revolting as a pig pen, but having a solid understanding of the tax rules is crucial to your success. Even if you have a bookkeeper and a competent CPA or tax preparer, they cannot be expected to help with you with all the daily transaction decisions that affect your taxes and cash flow, so you still need to understand the essentials. Not only will it help you maximize deductions and manage cash flow so there is more in your piggy bank, but it will also allow you to communicate more efficiently with your tax professional and get the most out of their advice.
3) Lastly, I need to set the record straight regarding the cover art. I have been getting some entertaining emails on this, but I have nothing against little innocent pigs, and would never advocate putting them in the crosshairs of a real gun. It was simply an attempt to add some levity to a subject that many find boring, and to tie in the tax deduction example of the pig and the hog with the reality that the IRS will put you in their crosshairs if you become a hog.
So there you have it: be a pig by digging in and learning the tax and accounting essentials and then arranging your affairs to keep your taxes as low as possible, but do not let yourself become a hog by getting too aggressive in your tax deductions, taking deductions you are not entitled to, or keeping poor records.
- Much like Chandler Bing’s threefold meaning of the box.↵
- Keep in mind that I am a city slicker who knows little about the actual differences between pigs and hogs, so don’t get hung up on semantics here if you work on a farm with pigs and hogs on a daily basis. My children watch Charlotte’s Web a lot, so this quote just makes me think of the humble and terrific Wilbur vs. the big spring pig at the fair.↵
- Thanks to ill-timed political ads that were in poor taste, it seems the use of crosshairs in media needs to be defended these days↵
- Which in most cases results in a broken piggy bank.↵